DIPP to Discuss Proposal of Banning FDI in the Tobacco Sector with NITI Aayog

Source from:  Live Mint 06/29/2016

In order to sort out differences over a proposal of the department of industrial policy and promotion (DIPP) to completely ban foreign direct investment (FDI) in the tobacco sector, the DIPP is holding talks with NITI Aayog which has Aayog has expressed its reservation on certain issues on the plan.

Earlier, the DIPP had proposed to ban FDI in technological collaboration in the tobacco sector in any form, including licensing for franchise, trademark, brand name and management contract. It eventually mean that FDI to be banned completely in the tobacco segment in any form. Though the FDI is already banned in the manufacturing of cigars, cigarettes of tobacco and tobacco substitutes, the latest proposal was aimed at completely choking flow of such investments into the sector.

On the other hand the NITI Aayog  expressed its concern on the DIPP proposal to ban FDI in technological collaboration in the tobacco sector in any form, stating that this move may send a wrong signal to the foreign investor community, at the time when India has relaxed rules substantially to become the world’s most liberalized country for FDI. Cigarette manufacturers, too expressed their concern against the DIPP move.

The proposal is however having support of the finance ministry and the commerce ministry, which is the administrative authority of the state-run Tobacco Board, and is in conformity to the Framework Convention on Tobacco Control, of India is a signatory, under which it has the responsibility of reducing consumption of tobacco products. The ban would eliminate the possibility of indirect flow of overseas funds to the tobacco sector. Enditem